The invention is generally related to electronic commerce and, more particularly, to assessing and reducing merchant risk associated with accepting electronic payments. Customers or consumers of retail establishments often pay for goods or services using a form of electronic payment such as payment or transaction cards such as credit cards. Some merchants utilize mobile communication devices for accepting payment. These merchants may utilize a cellular telephone or a personal digital assistant (PDA) that includes a payment application or software program for electronically accepting payments. These merchants can accept payments and complete transactions at various locations including various residential and commercial locations, houses, offices, job sites, cities, states and countries at various times.
During a transaction, when at a retail establishment or when dealing with a merchant that accepts payment with a mobile device, a consumer may tender a payment card such as a credit card to pay for the good or service. The merchant may enter credit card data into a payment terminal or the consumer or merchant may swipe the card through a payment terminal. If a mobile device is utilized, the merchant may enter data into the mobile device or swipe the card if the mobile device is so equipped. The transaction data is then sent to a third party payment processor that serves as an intermediary between the consumer and an issuer or bank to process the transaction using a merchant account of the merchant.
While many transactions are successfully completed using payment cards each day, fraudulent transactions such as identity theft, card skimming, etc. have become more common. In response to fraudulent activities, merchants, banks, payment processors, acquirers and card associations have employed various fraud detection systems. Factors considered by current fraud detection systems include the number of transactions completed during a certain time and the amount of the transaction. While existing fraud detection mechanisms have been effectively utilized to some degree, the amount of fraudulent activity can be reduced, and there are times when merchants at a retail establishment and merchants that utilize mobile devices for payment will provide goods or services to a consumer and not be compensated for those goods or services and instead be forced to accept a chargeback against his or her merchant account. A merchant may have little or no recourse in these situations, particularly if the consumer cannot be located.